There has been a lot of confusion in the business world about the differences between accounting and bookkeeping.  Ultimately, it comes down to the size of the company employing them and the purpose and phase that each serve for their respective employers/clients.

Bookkeeping is a actually a subset of accounting.  Very mechanical and regimented in its process, bookkeeping involves performing one or all of the eight steps involved in the bookkeeping cycle:  transactions, journal entries, posting, trial balance, worksheet, adjusting journal entries, financial statements and closing the books.  This includes everything from recording financial events (e.g. sale or return of a product, purchase of supplies, etc.) to posting in appropriate journals (e.g. Accounts Payable, Accounts Receivable, etc.) to preparing financial statements (e.g. balance sheets, income statements, etc.) to closing the books at the end of each accounting cycle.

Bookkeeping is more focused on data entry and the ongoing maintenance of detailed business records.  Bookkeepers are ultimately responsible for the reliability of the data that is used by accountants.

Accounting is much broader than bookkeeping, with the primary task of an accountant is to prepare reports based on the information gathered by the bookkeeping process.  Accountants and CPAs are also responsible for preparing all of the various tax return documentation for individuals and businesses (e.g. payroll tax returns, income tax returns, personal property returns, etc.).  Less mechanical and more subjective, accounting involves setting up a bookkeeping system, monitoring it and interpreting the results.

Accountants start by designing a bookkeeping system to capture the financial information that will be tracked by the bookkeeper(s).  Then they monitor the system to make sure it is performing as designed, making any adjustments as needed according to the business needs.  Finally, on a monthly basis, accountants present financial statements to business management and advise on the business decisions that may be based on them.  Because accounting actually requires a complete understanding of the entire bookkeeping process, accountants are often be placed in management of bookkeepers.

Accounting is more about designing information systems and interpreting the resulting information.  Accountants are ultimately responsible for identifying, measuring, reporting and analyzing economic events.

Ideally, a company contracts an accounting company to set up their financial system of record, then employs a bookkeeping to maintain orderly records that are then fed back to and used by their accountants to produce reports that are analyzed and used for business operations.

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